Paraguay's central bank left its policy rate unchanged at 5.50% per annum on Tuesday, marking a second consecutive monthly pause. The Monetary Policy Committee voted unanimously to maintain the rate, reiterating a focus on the bank's inflation target and the current economic data.
The central bank's inflation target is 3.5% with an operational tolerance band of plus or minus two percentage points. Committee members noted that inflation expectations remain anchored at 3.5% both for the coming 12 months and across the monetary policy horizon. Analysts cited in commentary expect borrowing costs to remain steady through the remainder of the year.
Activity and price developments
On the activity side, Paraguay's Monthly Economic Activity Indicator recorded a year-on-year increase of 3.8% in February. The central bank attributed that growth primarily to the services sector, agriculture, construction and the electricity and water segments. Complementing that picture, the Business Figures Estimator reported a year-on-year expansion of 4.8%, which the bank linked to higher sales of vehicles, fuels, chemical-pharmaceutical products and food products.
The central bank left its GDP growth projection for 2026 unchanged at 4.2%.
On prices, the Consumer Price Index showed a monthly rise of 0.8% in March, with the central bank identifying fuel price increases as the main driver of that monthly movement. Year-on-year total CPI inflation stood at 1.9%, while core inflation excluding food and energy was 1.8%.
External considerations and calendar
The committee flagged external risks to price stability, specifically pointing to heightened uncertainty stemming from geopolitical tensions in the Middle East. It noted adjustments in global projections with the International Monetary Fund lowering its 2026 global growth forecast to 3.1% while raising its global inflation projection to 4.4%.
The next scheduled Monetary Policy Committee meeting is May 22, 2026.